Universal Music Execs Finally Recognizing That It Needs To Make Its Money On Complementary Goods

from the slowly,-but-surely dept

The press and various tech blogs have had something of a field day with the news of Vivendi's CEO, Jean-Bernard Levy, calling Apple's iTunes' contract "indecent." Vivendi, of course, owns Universal Music, a company that has been rather aggressive in trying to squeeze money out of just about everyone while searching for new business models. However, reader Cannen writes in to point out that, while the "indecent" quote is getting all the headlines, there's a much more interesting quote buried further down in the article. Levy then is talking about Universal Music's plans to make money, and there are a few very interesting quotes:

Fleshing out UMG's strategy, Levy said it planned to focus on better exploiting the "monetization of an artist's image" which included branded clothes and TV shows.
"This is what we hope will revive our business," Levy said. "People indulge in piracy but spend a lot of money on many other things that are linked to an artist."
Levy forecast that "in the not so distant future", traditional music products such as DVDs and CDs would make up less than 50 percent of music publishing revenues.

That sounds shockingly similar to what some of us have been advocating for about a decade -- which had record industry insiders telling us we didn't understand their business at all. Of course, it's not all the way there. What's missing is the realization that if you stop thinking of it as "piracy" and start thinking of it as "promotion" then you want people to share the content, recognizing that it will spread further, creating more fans with more interest in buying all those other things linked to the artist. Of course, if any of the record labels want to get a better idea of how to do this, they should contact us. We could have helped them avoid much of the mess of the past ten years. There's still time to make sure that the next ten aren't even worse.

what has merchandise got to do with the record com

Given that these complementary goods (band merch) are not music, what the hell had this got to do with music publishers?

I understood that a great many touring rock bands make a major part of their income from merchandise (mainly t-shirts) sold direct at gig venues, because the merchandise can be produced directly by the band, and they get ALL the profit from selling it, not just a tiny cut, as with record sales.

Not such a good idea though

The record companies have already more than demonstrated their willingness to exploit new and breaking artists by writing extremely one-sided contracts that ensure that the overwhelming majority of the income from music sales goes to the record label, while a pittance goes to the artists. For years, the artists have had to resort to making money from other methods, like touring, merchandising, etc. Now the music labels are starting to figure out that there's less and less money to be made in selling the music itself, I doubt that it will be long before they start push even more exploitative contracts that take a significant cut of ALL revenues generated by the artists, not just music sales.

record industry to sell artist's blood

Spokesmen for the record industry have plans to further monetize recording contracts by selling the blood and plasma of THEIR recording artists. They are looking into kidneys and other duplicated organs.

Too expensive.

First, I don't download music off the internet (except that which I buy). These days ANYTHING having to do with music is just so damn expensive. I have a rule--I absolutely refuse to pay over $20 for a concert ticket. Obviously I don't get to see many shows anymore but back in the late 80s/early 90's it was awesome ($6.50 for Danzig, $8.00 for NIN, $10.50 for Slayer, $10 for ten bands including Deep Purple, COC and Danzig--the list goes on). But even then, as now, there is no part of my mind that can justify paying $25 for a T-shirt. Are you kidding me? One that doesn't last for more than 5 washings? Try finding a label show for under $20. No, I guess it's not for me anymore as much as I miss it. I have to live vicariously through live DVDs now.

It's great the labels are starting to see that pinpoint of light...maybe someday I can get the one or two songs I want from an artist for less than my first born and a pint of blood. When songs hit $.50, I'm all in--I'll make up for volume what they lose in profit.

Can I mention

that it wasnt to long ago, that BARS were Given, products to advertise the goods sold...GIVEN..
Those neet signs, and placards and steins, and even PAID for competitions like POOL with some great prizes...
NOW, the bar has to PAY for those neet Neon signs...And they AINT cheep.

Groceries used to GIVE away soup bones, and so did the buthers, even bones for dogs, were free.

the problems come in when SOMEONE realizes that WOW, we could make an extra $1..

Someone look up GLEAMING...Gleamers used to go by Farms and pick off the last couple rows of food, or dig out the LAST of the potatoes, trees for the fruits and nuts to give to the poor.

ASK the older folks, about BEING able to live on a shoestring...

NOW we are talking about a GROUP that hasnt changed sence 1995. AND dont WANT to change, or Make REAL money. They Fork out the money to OTHERS to do a job they COULD. ANd it costs them a LOT of money..
NOW they want to get it from the consumer, RATHER then doing the work INHOUSE at a CHEAPER cost per product...With a markup of AT LEAST $10-15 PER recording as PROFIT...THEY are scraping the BOTTOM.

Re: Can I mention

music promotion

Mike, I'm a long time reader. Far enough back to have sent in a reply to your "think of a tag line" promotion.
I'd like to hear your thoughts on reverse promotion as well.
A case in point I'd particularly like to see your thoughts on is Woodstock. Even though it was quickly proclaimed a free concert, it seems to have produced a lot of album, err, cd sales over the years. It seems straightforward enough, but your thoughts would be appreciated.

INDECENT?

For years, the recording industry has dangled the dream of fame, riches, and stardom in front of the face of the struggling artist; the artist is led to believe that the dream will be all theirs, all they have to do is sign away their publishing rights - which in essence is the only thing that could have netted the artist any real money.

Once signed, the artists are given an 'advance' to use to record their material, and for the actual cost of touring to promote that material as well. And yes, the record company will deduct that advance from future artist's earnings. But since the artists *have to* sign away their publishing rights, they make no money.

The recording industry has been making money on the backs of many talented musicians that get very little, if any, of the money that is made by the record company. Come to think of it, the recording industry is essentially a slave master, the musician a slave. Hows that for indecent?

I'm willing to bet...

that one of the main plots behind this "realization" is going to be an effort to start renegotiating contracts with artists so that record labels start getting a cut of revenue that doesn't come from album sales.

Show tickets
Collectible figures
Autographed goods
Appearal

They haven't learned their lesson. They just found a new way to squeeze money out of peoplel

Though not an attorney yet (find out if I passed the bar soon I hope) I have worked with music contracts for the last few years at an entertainment firm in NY. I can tell you that, when representing artists, merchandising clauses that grant labels a slice of that revenue are deal breakers. They have never been in contracts before and it's gross overreaching now for labels to think they should get a piece of that action, especially given how little money comes the artist's way under these obscenely one-sided deals.

It's a tempting argument for the labels to say to the artist "without us you wouldn't famous, and if you weren't famous you couldn't sell so much merch, so pay us for what we brought to your merch sales." Unfortunately, when such a clause is included in a record contract, the terms are obviously going to be unfair to any but the already successful artists. It might be ok if the label negotiated fairly and provided some benefit to the artist (whose going to sell merch regardless), but that seems doubtful.

But alas, music contracts are unfair to artists and everyone knows that, yet people continue to sign them. Unless artists wise up, have intelligent people around to tell them why their contract is a bad deal (and negotiate a better one), and are willing to risk making their own money rather than selling themselves to a label, there's really no way to stop these merch clauses from becoming standard fare.

Re: unfair music contracts

In regards to Aghast's speech on the saying that music artists should smarten up and make their own money, in what ways did you intend for these rising musicians to be their own boss and hand themselves a paycheck.How would they sell their albums or CD's in stores with out a label,im just confused ive never heard of a musician not having a label and dont get me wrong I am 100% against the industries of the world treating people like slaves making them work for the bills they pay.

Funny thing is the artist will be screwed one way or another. Kind of ruins your argument that you want the money to reach the artist when now the artist will have to pay the concert organizer, the t shirt distributor and so on.

You will either pay the label or the organizer, and the artist still gets screwed until they are famous. Same song different tune.